Affiliation:
1. School of Economics Zhejiang University Zhejiang China
2. School of Business Jiangnan University Wuxi China
3. College of Art and Communication China Jiliang University Zhejiang China
4. School of Information Management Jiangxi University of Finance and Economics Nanchang China
Abstract
AbstractThis study investigates the impact of patented innovation on the left‐tail risk of stock price, measured as the 1% value at risk (VaR) and expected shortfall (ES). Using the sample of all listed firms in the Chinese A‐share market from 2007 to 2020, we find that the quantity and quality of patents significantly decrease left‐tail risk. Second, the effect is more pronounced for firms in regions with patent pledge systems or stronger intellectual property rights protection. Short‐selling constraints and the engagement of retail investors hinder patented innovation from reducing left‐tail risk. Third, we further explore the mechanisms and find that patented innovation enhances financial performance, mitigates financial constraints, and attracts long‐term institutional investors, thereby decreasing left‐tail risk.
Funder
China Scholarship Council
National Natural Science Foundation of China